Institutions gain OTC access to prediction markets

TLDR

Institutions can now access crypto prediction markets over the counter through a BitGo and Susquehanna setup, signalling a step toward institutional?grade event trading.

1. BitGo and Susquehanna Crypto launched an OTC service that lets hedge funds and similar clients trade prediction market contracts directly from BitGo custody using crypto or stablecoin collateral, with minimum sizes around $100,000.
2. This plugs prediction markets into familiar institutional workflows, alongside new clearing services from firms like FIS and Kalshi, and could increase demand for BTC, ETH and stablecoins as trading collateral.
3. Regulatory and conduct risks remain high, with US states and federal agencies still debating whether prediction markets are gambling or derivatives, so access is expanding while rules are still unsettled.

Deep Dive

1. How The New OTC Access Works

BitGo and Susquehanna Crypto have created an institutional OTC gateway where hedge funds, family offices and ultra high net worth clients can trade event based contracts using collateral already held on BitGos platform. Trades are routed through BitGos OTC desk, while Susquehanna provides liquidity, typically in ticket sizes of $100,000 or more per contract, documented under standard derivatives style agreements such as binary option confirmations.

According to multiple reports, this setup lets clients post USD, stablecoins, Bitcoin or other crypto as collateral and execute bilateral trades without moving assets to retail platforms or liquidating positions, effectively wrapping prediction markets inside infrastructure institutions already use for other OTC derivatives. These contracts can reference outcomes like elections, macro data releases or even crypto price levels, with prices reflecting the implied probabilities of each outcome.

2. Why Institutions Care About Prediction Markets

Until now, prediction markets have mostly been accessed via retail oriented venues like Polymarket or Kalshi, which require separate onboarding, custody and funding. BitGos model allows large investors to keep assets in qualified custody and trade under familiar legal documentation, reducing operational friction and compliance objections.

In parallel, FIS and Kalshi launched a clearing service that lets brokers clear prediction contracts through existing post trade systems, with sector volume reportedly growing from under 16 billion dollars in a year to nearly 64 billion dollars and Kalshi alone seeing over 10 billion dollars in monthly volume. Together, OTC execution, custody integration and clearing show prediction markets evolving from experimental retail platforms into an asset class that can sit alongside futures and options in an institutional portfolio.

3. Regulation, Risks And What To Watch

Regulation is still the main wild card. Several US states have treated prediction markets as gambling and acted against platforms like Kalshi, while other courts and regulators have suggested these contracts fall under federal derivatives rules. At the same time, the CFTC has opened formal consultations on prediction markets, and lawmakers have proposed bills to limit certain event types, especially sports and political contracts.

Platforms have also tightened conduct rules after criticism of trades based on confidential information. Kalshi and Polymarket recently introduced bans on candidates and insiders trading markets tied to their own campaigns or organizations, and enhanced surveillance to address insider trading concerns.

For crypto users and institutions, this means access is improving faster than the legal framework is stabilizing. Key things to watch are how regulators classify event contracts, whether clearing and reporting standards converge with traditional derivatives, and how concentrated liquidity becomes in a small set of highly political or macro sensitive markets.

Conclusion

Institutional OTC access to prediction markets via BitGo and Susquehanna marks a meaningful step toward treating event contracts as a mainstream derivative that can use crypto collateral and institutional workflows. The build out of execution, custody and clearing infrastructure suggests prediction markets are moving closer to traditional financial markets, but regulatory definitions and conduct risks are still evolving. For now, the opportunity is growing, but so are the stakes around how these markets are supervised and how responsibly they are used.